Scientific Innovation Spurs a Major Industry
Many of the greatest achievements of modern medicine can be attributed to the pharmaceutical industry and health care around the world has benefitted from increasing accessibility to cutting edge pharmaceutical products. The intertwinement between the provision of medical care and pharmaceutical products has never been greater, so much so that the two are often indistinguishable. The explosion of pharmaceutical innovation and products has also spurred one of the largest industries in the world economy, which brings in over one trillion U.S. dollars annually. With such an extreme influx of money, the pharmaceutical industry has also become a target for unscrupulous practices that have plagued the industry with problems of fraud, over-utilization, as well as deceptive and overly aggressive marketing strategies.
“The rate at which prescription drug costs increased [in 2015] doubled over the average increase of the prior five years. This was driven by a combination of factors, including the introduction of new specialty drugs, a continued increase in compound drugs, and price increases for both brand name and generic drugs.” Scott Weltz ‒ Co‒Author of the Milliman Medical Index Report
Pharmaceutical Costs on the Rise
In 2014, a jaw dropping $297.7 billion was spent on retail prescription drugs in the United States, a 12.2 percent increase over retail prescription spending in 2013. Medicare reimbursements accounted for an estimated $85 billion of that total, which was 14 percent of all Medicare health care spending.
The unrelenting increase in pharmaceutical spending not only evident on the aggregate level, but also felt at the household level. In 2015, a typical family of four with employer provided PPO health coverage spent $24,671 on healthcare, a 6.3 percent increase from 2014. Pharmaceutical spending was cited as the primary cause for the increase. These increases cannot be attributed to increased costs for pharmaceutical companies but instead represent increased profits; the World Health Organization estimates that the global pharmaceutical industry brought in over $300 billion in profit in 2014 and predicts profits will surpass $400 billion by 2017.
“”Illegal conduct and fraud by pharmaceutical companies puts the public health at risk, corrupts medical decisions by health care providers, and costs the government billions of dollars,”” -Tony West, Assistant Attorney General for Department of Justice Civil Division
Pursuit of Massive Profit Can Lead To Fraud
This massive influx of cash to the for-profit pharmaceutical industry has led to a proliferation pharmaceutical fraud qui tam cases and this area represents some of the largest recoveries in qui tam history. Since 2012, nearly $6 billion have been recovered thanks to whistleblowers who have come forward to expose pharmaceutical fraud. Despite these recoveries, some individually in the billions of dollars, many major pharmaceutical companies have exhibited recidivist behavior, seemingly viewing False Claims Act settlements as simply a cost of doing business.
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